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HS2 Values of time shot to pieces

The values of time used in the January 2012 and October 2013 studies are as follows

£ per hour

Business

Commute

Leisure

January 2012

47.18

6.46

5.71

October 2013

31.96

6.81

6.04

The Economic Affairs Committee of the House of Lords is scathing. Here is a sample from the Committee’s report, ‘The Economics of High Speed 2’ published in March 2015.

At paragraph 378:

“The values of non-work travel time savings are based on surveys of motorists from 1994. We are not convinced that basing values of time on outdated surveys of motorists is the best way of calculating some of the benefits of a major rail project; rail users can use journey time productively. 33 per cent of the net transport benefits of HS2 are derived from these values (£19.3 billion). The Department for Transport has conceded that the data are old and that fresh evidence is required.”

At paragraphs 395 and 396:-

“The values of working time savings for rail do not take account of the fact that time on a train can be used productively. The Institute of Transport Studies at the University of Leeds concluded that the evidence behind the values was unclear. 70 per cent of the net transport benefits of HS2 derived from these values (£40.5 billion)”.

“82 per cent of the estimated total benefits of HS2 are derived from the value placed on work and non-work travel time. We find it difficult to have any faith in benefits that have been estimated on the basis of these values, particularly as the Department for Transport has recently concluded that fresh evidence is required and has commissioned further research”.

We comment, the fact that HS2 Ltd and the Government hang over £50bn of expenditure off values subject to such criticism is quite extraordinary, but it gets far worse.

We pick out two key finding from the report by Mott Macdonald of June 2009 with the title “Productive Use of Rail Travel Time and the Valuation of Travel Time Savings for Rail Business Travellers” produced for the DfT.

“It was found that the proportion of business travellers working on the train was, in Spring 2008, 82% for an outbound journey, and 77% on the return journey, a significantly higher value than the figure of 52% obtained from the National Passenger Survey (NPS) in Autumn 2004, the last comparable dataset. For those that spent some time working, the percentage of journey time spent working was 60% on the outward leg, and 54% on the return leg. For both directions combined, this corresponds to 46% of journey time by all business travellers being spent working”

“In economic appraisal, if work is done on the train, it has to be appraised in terms of the working time needed were that to be done in the usual office environment. The SPURT surveys showed that some two-thirds (68%) of working business travellers would take “about the same” amount of time, 8% would take “more” time (on average 29 minutes more) and a quarter (24%) would take “less” time (on average 18 minutes less). Across all journey lengths a slight saving of 1.7 minutes per journey would be realised in the usual workplace as compared to the train, this corresponds approximately to a 97% efficiency of working on-train compared with at-workplace”

Unfortunately the report does not tell us the proportion of time used when an employee arrives at work. That will vary according to the task but, with coffee breaks, dream time and interruptions one can well imagine only half is truly heads down for people likely to be sent off on business trips. The other office time may be used similarly to the non-working time when on a train. A report in the Times of a study carried out by Microsoft said that typically workers wasted, or were not working for, three hours of each working day, not counting lunch breaks

If so then the value of train time savings for people on business may reasonable be set close to zero – obviously destroying the economic case for HS2.

We also have the Institute of Transport studies (Leeds) report of April 2013 with the title Valuation of Travel Time for Business passengers. The conclusion on page 10 says “It is clear that there is no consensus on the theoretical underpinnings of the business value of time. Whilst the Cost Saving Approach dominates international appraisal practice, several practitioners have reservations about its theoretical underpinning”. Table 6.4 provides a range for the values of business time for rail with 60% of seats taken of £19 to £60 per hour for long distance rail depending on the methodology used.

Paul Withrington, director of Transport Watch comments:

“With uncertainty on that scale lurking in the background, why is this scheme even being considered? Even on the incredibly optimistic assumptions embedded within the analysis it is a loser.”

“These analysis are not worth the paper they are written on. Instead decisions should be made on a financial basis – namely if it makes a loss in the tens of of billions of pounds, for heaves sake do not build it”

“High speed rail is not a ‘public Service’ worthy of subsidy. Neither is Rail. After all rail is used overwhelmingly by the better off. Why should they be subsidised?”